New Delhi: Faced with rising delinquencies, the Indian banking sector has written off loans worth Rs 4.8 lakh crore in the past decade. Loan write-offs by banks rose by a whopping 61% to Rs 1.44 lakh crore in 2017-18 from the previous year, data compiled by credit rating agency ICRA shows.
This data was first reported by the Indian Express.
Public sector banks (PSBs) accounted for 83.4% of total loan write-offs by the banking sector during the decade. In the last fiscal too, PSBs’ share in banking industry’s total loan write-offs was nearly the same.
Banks write off their loans when recovery will take longer than expected. However, the latest data shows that recovery of written-off loans has been less than optimal: for instance, government data shows that between April 2014 and December 2017, PSBs wrote off Rs 2.72 lakh crore worth of loans. In the same period, they managed to recover only Rs 29,343 crore – a mere 10.7% – of the loans that had been written off in that three-year period.
Loan write-offs by public, private sector banks in the last decade
| FY | Loan write-offs by banking sector ( Rs crore) |
| 2008-09 | 2,165 |
| 2009-10 | 15,068 |
| 2010-11 | 20,299 |
| 2011-12 | 18,248 |
| 2012-13 | 31,549 |
| 2013-14 | 25,424 |
| 2014-15 | 52,947 |
| 2015-16 | 71,253 |
| 2016-17 | 89,048 |
| 2017-18 | 1,44,093 |
| Total | 480,093 |
Source: ICRA
In 2017-18, the SBI wrote off bad loans of Rs 40,281 crore in 2017-18, scam-hit PNB Rs 7,407 crore and Indian Overseas Bank Rs 10,307 crore.
Private banks too saw a jump in their loan write-offs in 2017-18. They together wrote off Rs 23,928 crore in bad loans, 82% higher compared to the previous year. Axis Bank wrote off Rs 11,688 crore and ICICI Bank Rs 9,110 crore. Private sector banks wrote off loans of Rs 79,490 crore over 10 years.
The banking sector’s bad loans continue to rise inexorably even as the Narendra Modi government and the Reserve Bank of India (RBI) pile pressure on lenders to go after big corporate defaulters. This has kept banks from stepping up credit disbursal to support the economic recovery.
Following RBI directive, lenders have taken a dozen corporate borrowers including Bhushan Steel, Essar Steel and Monnet Power and Steel, which together account for nearly Rs 1.75 lakh crore of the bank sector’s bad loans, have been taken to bankruptcy court by lenders. Several cases have been decided. However, lenders have been forced to take big hair cuts.
The RBI has tightened its guidelines for identification and resolution of stressed loans in February this year to put pressure on banks to expedite recovery and clean up balance sheets.
However, ICRA has expressed fears that the new norms could led to greater under-reporting of bad loans by banks.
Total bad loans of banking sector is estimated to have risen to Rs 9.3 lakh crore at the end of March, from Rs 8.83 lakh crore at the end of December 2017.